Securing the right property development finance can make or break a development project – this guide covers what you’ll need to obtain funding and move forward with confidence.
Before diving into details, it’s worth explaining how property development finance works, and what this means for SME developers. Knowing the basics helps you understand how best to prepare, what lenders are looking for – in a developer and a project – and the criteria you’ll need to meet.
How does property development finance work?
When people search for property development finance, they’re usually looking for funding that covers the gap between buying a site, paying build costs, and reaching the exit (sale or refinance). Unlike a standard mortgage, development finance is short-term – typically 6 to 36 months – and released in stages as construction milestones are hit.
Key points to understand:
Loan to gross development value (LTGDV) or loan to cost (LTC): Lenders typically offer 65–70% of your projected exit value or up to 80–85% of total costs (we can often exceed this percentage, as we’ll discuss later). Lenders want to see you’ve got equity invested and that the project has a healthy margin, even if values dip. Demonstrating strong numbers here reassures lenders you’ve got skin in the game and aren’t over-leveraging.
Interest payments: Can be structured in a few ways. With rolled-up interest, payments are deferred and settled at the end of the loan when you sell or refinance, helping cash flow during the build. This is our preferred and recommended option. With fully-retained or serviced interest, payments are made at each phase or monthly, which can be more expensive, putting pressure on cash flow. Some lenders also offer a hybrid interest model, so it’s worth exploring options with your lender.
Project exit plan: Needs to be crystal clear. Most projects exit through selling completed units or refinancing onto a long-term mortgage. Lenders want to see a realistic plan backed by market evidence, with contingency options if sales are slow or refinancing terms tighten.
Security and staging: Lenders normally take a first charge over the site or property, giving them priority if things go wrong. Funds are released in drawdowns after inspections confirm progress, which helps manage risk but also means you’ll need to plan cash flow carefully between stages.
Team profile: SME developers with a strong team, evidence of completed projects, or experienced partners have a much easier time raising finance. Even if you’re new to development, you can strengthen your case by showcasing professional advisors, contractors, or joint venture partners who bring credibility through proven success.
Communication: It’s key to ensure that communication is clear, consistent and timely throughout. This is a two-way street, so look for lenders who communicate clearly, and ensure you provide pertinent details at every project stage or as soon as circumstances change. This ensures everyone remains aligned and can swiftly adapt to any inevitable project challenges.
What metrics and criteria do lenders look for?
Development finance lenders in the UK follow strict risk criteria. They’ll want to see a viable deal, solid margins, and a reliable exit. A well-structured proposal shows you’re offering them an opportunity, not just asking for money.
One of the quickest ways to build lender confidence is showing you understand – and can hit – their benchmarks. Here are typical metrics lenders look at, with standard industry benchmarks:
| Metric / ratio | Industry benchmarks* | Why it matters |
| Loan to GDV (LTGDV) | 60% – 70% | Protects lender if exit values fall |
| Loan to cost (LTC) | 80% – 85% | Ensures you have equity invested |
| Contingency buffer | 5% – 10% | Covers cost overruns |
| Developer equity | 10% – 20% | Shows commitment |
| Minimum margin | 10 – 15% | Proves viability |
| Project IRR | 12% – 18%+ | Confirms solid returns |
*As a specialist lender, CrowdProperty typically offers more flexibility than industry norms. For example, deals can be done at 90-95% LTC, or even higher if you’ve added value through planning gain or bought smartly. 5-10% developer equity and less than 10% margin is also feasiible. As a lender, we can truly add value by assessing borrowers on their merits, then offering flexible terms to maximise project success.
For SME property development funding, you’ll need conservative build costs, clear contingencies, and sensitivity analysis (like “what if costs rise 10%?”). Showing you’ve tested different outcomes builds trust fast. For land development loans, risks are higher before planning permission, so lenders may hold back funds until planning is secured.
What challenges will you face and how can you overcome them?
Even if your project numbers stack up, lenders often look beyond the spreadsheets. SME developers can find themselves facing extra scrutiny simply because they’re smaller, less established, or working with tighter margins. Market conditions also play a role – from rising build costs to tougher sales environments – and these can make lenders cautious.
The good news is that most of these hurdles can be anticipated and addressed. By understanding what typically concerns lenders, and by preparing your answers in advance, you’ll not only improve your chances of approval but also speed up the process. Here are some of the most common challenges SME developers face – and practical ways to overcome them:
- No track record: Lenders can be cautious if you’ve not delivered similar, or even any projects before. Partner with a more experienced developer, highlight smaller schemes you’ve completed, or bring in strong professional advisors and contractors to boost credibility.
- Rising build costs: Inflation and supply issues make cost overruns more likely. Fix prices into contracts where you can, keep a solid contingency buffer, and secure key materials early to reduce exposure.
- Exit worries: Your repayment route is critical. Stress test sales values (for example, 10% lower) and outline fallback plans like refinancing or renting units. Showing multiple options makes lenders more confident.
- Poor communication: This is a red flag for lenders, so communicate early and often. Being transparent with your lender – even if it’s bad news – means they can work with you to resolve issues before they escalate and derail your project completely.
- Slow processes: Traditional lenders can take too long. Specialist lenders such as CrowdProperty now offer an instant decision in principle, and faster approvals. Respond to requests quickly, and keep documents like appraisals, consents, and contracts on-hand to avoid delays.
- Funding land without planning: Sites without consent are higher risk. Negotiate staged advances – part upfront, the rest after planning’s granted – and demonstrate you’ve got strong planning advisors and a realistic timeline.
Facing these challenges head-on – with evidence, preparation, and clear strategies – shows lenders you’re serious, lowers their perception of risk, and gives you a much stronger chance of securing the funding you need.
How do you choose the right lender and get approved?
Securing funding isn’t just about finding a lender who’ll say yes – it’s about finding the right fit for your project. Different lenders have different appetites for risk, funding structures, project specialisms, and ways of working – all can have a big impact on how smoothly your development runs.
With so many development finance lenders in the UK, it pays to be selective and strategic. Here’s what to focus on:
- Check experience: Go for lenders who specialise in SME residential property development funding. They’ll typically understand the unique risks, constraints and timelines of your projects and will usually be more flexible with drawdowns and terms.
- Compare all costs: Don’t just focus on the interest rate. Factor in arrangement fees, monitoring surveyor fees, and exit charges, as these can add up and change the true cost of the loan. Ask for a full breakdown so you can compare lenders properly.
- Build a strong pack: Present your project clearly. Include a concise summary, site photos or visuals, financial appraisals, and stress tests that show how the numbers hold up if values or costs shift. A professional pack speeds up approvals and strengthens your position.
- Use brokers: Good brokers can open doors to lenders you wouldn’t find on your own and can sometimes negotiate better terms. They’ll know which lenders are most active in your space and who’s willing to back SME developers.
- Start early: Don’t wait until you’re desperate for funding. Engage with lenders as soon as you’re looking at a site. Building relationships in advance means they already know you and your track record when the deal comes through.
- Negotiate smart: Discuss more than just the rate. Talk about drawdown schedules, contingency requirements, monitoring processes, and exit terms. A loan that’s structured to match your project is often worth more than one that’s simply cheaper on paper.
When comparing offers, ask how lenders handle development loans, whether they’ll accept mezzanine finance, consider deferred payments, and what their turnaround times are. The best lender isn’t just the cheapest – it’s the one who understands your project and supports it through delivery.
How can you move your project forward with the right finance?
Securing development finance as an SME developer isn’t easy – but it’s doable. Understand lender metrics, build a tight proposal, stress test your assumptions, and choose the right finance partner. Do that, and you’ll unlock the funding needed to push your project ahead.
To help put these ideas into action, here’s a simple step-by-step checklist you can keep to hand as a quick reference before approaching lenders and preparing your next application.
- Know the key metrics – LTGDV, LTC, margins, and contingency buffers
- Prepare a clear and professional project pack with numbers, visuals, and stress tests
- Be realistic with costs and exit values – and show fallback options
- Strengthen your team with experienced partners, advisors, or contractors
- Choose lenders who understand SME property development, not just generic commercial loans
- Compare the true cost of finance, including fees and charges – not just interest rates
- Engage early and build relationships before you need funds
- Keep your documents organised and ready to speed up approvals
- Negotiate smartly on terms like drawdowns, monitoring, and exit flexibility
You may find these articles interesting:
10 mistakes property developers make and how to avoid them
Broker or direct – what’s the right choice for property development finance?
Six steps to securing profitable property development deals
Ready to discuss your next project?
At CrowdProperty, we support developers and brokers, – offering deep market knowledge, responsive service, and tailored funding solutions.
Whether you’re working with a broker or reaching out to us directly, you’re guaranteed access to expert-led development finance that delivers on certainty, speed, and transparency.
If you’re a developer looking for funding, call 0203 012 0166 or email our Direct Team.
If you’re a broker who wants to work with us, call 0204 525 2251 or email our Broker Team.
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